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Functional Luxury Is the Future of the Antiques Industry

Functional Luxury Is the Future of the Antiques Industry

The antiques industry has traditionally been driven by demographics. As people reach middle age and older they often became interested in purchasing items they fondly remembered from their youth. This is a way for them to recapture special moments or warm feelings from their childhood. In short, nostalgia has always been a major factor determining demand and price trends in the antiques market.

The only problem is that this long-standing antique market rule-of-thumb is beginning to erode. While there are still quite a few Generation-X collectors out there chasing vintage Teenage Mutant Ninja Turtles or Michael Jackson paraphernalia, their numbers and impact on the antiques industry are far smaller than that of their predecessors.

This has been bad news for many antiques dealers, who have been slow to adapt to this transition. As one would expect, many professionals in the antique industry are notoriously reluctant to embrace change. Instead, most antique dealers have hunkered down and continued to do things the way they always have.

This mostly means buying collectibles from the 1970s, 1980s and 1990s and then patiently waiting for hoards of middle-aged nostalgia seekers to mob their shops with fist-fulls of money. Unfortunately, this expected outcome has failed to materialize. The situation has deteriorated so badly that many old-fashioned antique dealers have simply given up and gone out of business, leading to the widespread decline of the physical antique store.

Despite the challenges that the antiques industry has faced over the last decade, I don’t believe it is in terminal decline. To the contrary, I believe that certain segments of the antiques market will boom. However, in order for antique dealers and collectors to properly position themselves, they will need to understand why and what kind of antiques people will desire in the future.

In my opinion, the future of the antiques industry lies in the concept of functional luxury. Functional luxury is the idea that high quality antiques can be used as chic, cost-effective substitutes for modern luxury goods. For example, rather than spending $10,000 to $12,000 on a new Rolex wristwatch, a person might be delighted to find that he can acquire a beautiful vintage Omega, IWC or Patek Philippe wristwatch for a fraction of the cost.

Functional luxury can apply across a wide swath of the antiques industry. For instance, vintage clothing, handbags, jewelry, shoes and other accessories easily provide great value for your money and look great doing it. Antique walnut or mahogany furniture is immeasurably better in both looks and durability than the junk in an IKEA flat-pack, but hardly costs any more.

In decades past, people demanded quality goods. As a result, antiques were often crafted to a very high standard. Even though these vintage items may have been made 50 or even 100 years ago, many of them are still perfectly usable today, provided they have been reasonably well-cared for. Functional luxury exploits this attribute, allowing you and I to own items built to a standard that would be cost-prohibitive today – a situation only possible because of the exceedingly high quality of many antiques.

Another aspect of functional luxury that is vitally important is the notion of authenticity. In the modern age, we are constantly bombarded by advertising trying to convince us that this brand or that brand is “authentic” in some way. Yet, most of these brands are owned by faceless mega corporations that farm out production to overseas sweat shops with poorly paid workers. This is the antithesis of authenticity, and a growing number of people are becoming aware of that fact.

I also believe that there is a burgeoning disgust with the idea of collecting stuff just for the sake of having it. Many Millennials grew up in households with Boomer parents who were borderline hoarders. These Boomer households were filled with an abundance of junk, much of which was made in China. It is my belief that Millennials have had their fill of this quantity over quality lifestyle. They will undoubtedly gravitate towards luxury minimalism and its philosophical twin, functional luxury.

Even investing can benefit from the trend toward functional luxury. How many people dutifully (and mindlessly) dump 5% of their paycheck into boring equity index funds twice a month? This is all well and good until the next stock market crash decimates retirement accounts all over the world.

These unfortunate, naïve investors will belatedly discover that they could have been putting their hard-earned money to work in gorgeous investment grade antiques instead, like this vintage British gold sovereign proof set from 1985. Money invested in tangible assets such as high quality antiques and fine art is money that will not vanish in a market panic or corporate bankruptcy.

There is even a green angle to functional luxury. The motto “reduce, reuse, recycle” is a rallying cry of the modern environmental movement. And antiques are perfectly positioned for reuse, regardless of whether they are employed for their originally intended purpose or adapted through upcycling.

Functional luxury lets us pursue quality and authenticity at prices that won’t break the bank. Functional luxury allows average people – people just like you and me – to live better lives through antiques. And, honestly, that is a pretty good future.

 

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Why Did the Major Auction Houses Abandon the Art Market’s Low End?

Why Did the Major Auction Houses Abandon the Art Market's Low End?

One of the most troubling art market trends of the last decade has been the stratospheric rise of ultra-expensive artwork while low to mid-priced works languish in obscurity.  A great example of this phenomenon was the November 2017 Christie’s auction of the recently rediscovered Leonardo Da Vinci painting, Salvator Mundi.  This work by that most celebrated of the Old Masters sold for an eye-watering $450.3 million, making it the world’s most expensive piece of art to date.

The bidding for the famous painting started at $100 million and rapidly rose in frenzied competition before finally settling at $400 million almost 20 minutes later.  Now you might well be wondering, if the hammer price for the work was $400, then where did the $450.3 million final price come from?  The answer to that, my friend, is the ultimate topic of this article.

The difference between the hammer price and the final price in an auction is called the buyer’s premium.  The buyer’s premium is effectively a commission paid by the winning bidder to the auction house for its services.  In the case of Leonardo Da Vinci’s Salvator Mundi, the buyer’s premium was a hefty $50.3 million.

Can you imagine it?  Getting paid over $50 million for auctioning a single artwork?  It must be nice work, if you can get it.  And the world’s two major art auction houses, Christie’s and Sotheby’s, get a lot of it.

Of course, Christie’s did incur certain expenses associated with auctioning the Renaissance masterpiece.  They had to pay for insurance, security, photography, authentication and marketing, in addition to the auction itself.  But even so, I’m certain Christie’s made a substantial profit on this particular transaction.  And this really encapsulates the prevailing business strategy of the world’s largest auction houses – conduct sales of the world’s most expensive artworks, charge a hefty buyer’s premium and then profit.

It didn’t used to be this way.  Back in the 1980s and 1990s, both Christie’s and Sotheby’s had divisions dedicated to auctioning art at the lower end of the market.  Christie’s affordable art subsidiary was known as Christie’s East, while Sotheby’s contender was called Sotheby’s Arcade.

Now when I use the term “lower end art” in this context, I am referring to works primarily priced between $1,000 and $5,000.  But I understand if you chafe at the thought that spending several thousand dollars on art is considered “low end”, especially when you can buy some really compelling works for just a few hundred dollars or less.

These “low price” divisions were an attempt by the two largest auction houses to compete for first-time art buyers, interior decorators and amateur art collectors.  These types of people were not lucrative, big-spending customers.  But the auction houses hoped they could one day be cultivated into dedicated art lovers – with budgets to match.

Unfortunately, this enlightened philosophy went out the window when the global economic storm clouds moved in.  Repeated financial crises in 2001 and 2008 hurt the middle class, damaging their ability and willingness to buy art.  Instead of toughing out these poor business conditions for the sake of building long-term relationships, the major auction houses cut and ran.  Christie’s closed its Christie’s East division in 2001, while Sotheby’s quietly wound down its Sotheby’s Arcade operations later on.  Neither company currently accepts any consignment that is estimated to be worth less than $5,000.

But that wasn’t the only move the big auction houses made to distance themselves from the low and mid range of the art market.  They have also engaged in an extensive series of buyer’s premium increases meant to discourage art collectors of more modest means.  These fee increases occurred in 2008, 2011, 2013, 2016 and 2017 for both major auction houses.  Right now, Christie’s and Sotheby’s levy an outrageous 25% buyer’s premium on purchases below $250,000 and $300,000, respectively.

If it seems suspicious to you that Christie’s and Sotheby’s tend to raise their prices in lockstep, you’re not alone.  Both companies were accused of price-fixing by U.S. regulators in the 1990s and ultimately agreed to pay a $512 million fine to settle the allegations.

It is clear that the largest auction houses do not want to be bothered with anything less than the very best and, by extension, most expensive artworks.  I believe there are a few major reasons for this.

First, the capital markets have become incredibly short sighted over the past 20 years.  Corporate CEOs are expected to produce immediate financial results regardless of the business environment.  CEOs who cannot or will not take the steps necessary to create prompt and robust profit growth are quickly ushered from their posts.  This ironclad law of modern business management has been ruthlessly applied to the world of auction houses, even though it is slowly gutting the industry from within.

Next, although the buyer’s premium (expressed as a percentage) declines as the value of an artwork sold at the major auction houses increases, the absolute value of commissions on high priced works is too lucrative to ignore.  The Leonardo Da Vinci Salvator Mundi painting mentioned earlier in the article is a prime example of this situation.  Christie’s and Sotheby’s would much rather make a billion dollars in sales by auctioning a hundred different $10 million paintings than by selling ten thousand paintings at only $100,000 each.

Finally, the increasing economic bifurcation between the middle class and the extravagantly wealthy has meant that the money is in the high end of the art market.  In fact, it is really in the ultra-high end of the market.  Generally, only the very best pieces by the most renowned artists, mostly in the post-World War II and contemporary space, have flourished in this environment.

While I feel that the worm will one day turn on this trend, for now it is inescapable.  The super-rich are buying more outrageously priced (and unconscionably ugly) art these days than ever before.  And it means that, for now at least, the major auction houses are content to ride the wave, even though I suspect they will come to regret their snubbing of the middle class one day.

 

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Junk Collectibles – The Bane of the Antiques Connoisseur

Junk Collectibles - The Bane of the Antiques Connoisseur

One of the reasons I collect antiques is because I love high quality items.  Fine antiques are often made from some of the most durable, beautiful and desirable raw materials known to man.  This not only grants them an unmatched look and feel, but also a far longer useful life than whatever clutter you can buy at Walmart or Amazon.

But I don’t want to talk about fine antiques today.  Instead, I want to discuss the other end of the spectrum – the junk collectibles made from the nastiest materials conceivable.  Junk collectibles are the kind of banal stuff you’ll find piled knee-deep at almost every flea market, garage sale and swap meet in the country.  And they all have one thing in common.  They are almost always made from one of the unholy trinity of garbage materials: plastic, plywood/chipboard or cardboard.

Of these three undesirable materials, plastic is perhaps the most offensive.  Because it is cheap and versatile, plastic has been gradually repurposed to fill every niche in our lives over the last 50 years.  Whereas during the mid 20th century it was employed with a modicum of aesthetic and engineering care, plastic has since metastasized into a modern-day plague.

This trend has been especially apparent in the junk collectibles segment of the antique market.  A growing influx of collectibles into the marketplace are invariably made of plastic, as items from the 1970s, 1980s and 1990s slowly gain the attention of collectors.  For example, innumerable vintage toys, from Legos to action figures to Lite-Brites, were all made of plastic.  Other vintage collectibles as varied as movie memorabilia, wristwatches and kitchenware were also often made from plastic.

Now, you may ask why I hate plastic so much.  The reason is very simple: it doesn’t last.  Plastic ages very poorly over time, becoming brittle and often discoloring.  Sunlight and temperature extremes accelerate this process.  Plastic items don’t have to be used for very many years before they are covered in chips and cracks, or even deteriorate into a gummy mess.

So if you have an interest in late 20th century junk collectibles, you had better make sure to keep them in strictly climate controlled storage, far from the rays of the hated sun.  And you should definitely handle them as infrequently as possible too.  Most old plastic collectibles are fragile flowers, metaphorically speaking.

In contrast, fine antiques made from comparable organic materials, such as amber, bone, ivory, wood, tortoiseshell or antler, are surprisingly tough.  These kinds of antiques are often 100 to 200 years old, and despite having been dropped, mishandled or neglected for much of their lives, are often still in remarkably good shape.

Sadly, I wish I could restrict my diatribe to only junk collectibles made from plastics.  Alas, cheap composite wood products like plywood, MDF and chipboard have also done their part to contribute to the poor quality of vintage furniture.  Before the 1980s, pretty much all furniture sold was assembled in a factory by skilled craftsmen before being shipped as completed units to furniture stores.

However, it wasn’t long before IKEA burst onto the scene with its ubiquitous “flat-pack” or “ready-to-assemble” furniture.  What began as a good idea quickly devolved into a race-to-the-bottom in term of furniture cost, quality and looks.  Self-assemble furniture from the last few decades is yet another junk collectible, ultimately fit for little else than the landfill.

And then we come to the last of the three horsemen of the junk collectibles apocalypse – cardboard.  Cardboard has traditionally been used as a packing or container material.  In many ways, despite the obvious drawbacks of cardboard – fragility, coarseness and a lack of aesthetic appeal – I find it to be the most forgivable of substandard materials.  After all, cardboard rarely pretends to be something that it isn’t.

Huge swaths of junk collectibles incorporate cardboard in some way.  Any vintage item described as “new in box” by online sellers is invariably encased in a cheap cardboard sarcophagus.  Other collectibles, like vintage baseball cards, board games and select advertising media, use cardboard in a more central role.

Of course, even when dealing with lower quality materials, a distinction should be made between the better implementation of these materials before the 1970s and the horrifically cheap standards in place today.  Plastics are the best example of this trend.  From the late 19th to the early 20th century, plastics were considered the pinnacle of human scientific achievement.

Because of this, early plastics, like celluloid, Bakelite and Galalith, were judiciously used in some very high value items, where appropriate.  Likewise, plywood might be discreetly deployed as an unseen, purely structural member in a piece of otherwise fine Mid Century furniture.  Even cardboard was generally fabricated to a higher standard before the 1970s, although this material definitely has its limits.

But since the 1970s, cost cutting has emboldened product manufacturers to progressively cheapen products in every dimension possible.  Striving to shave a few pennies off the unit cost of goods eventually led to the pervasive use of cheaper, thinner plastics and cardboards.  Plywood, along with other wood composites, became far more widespread in furniture, as well.  As a result, the last few decades of the 20th century have left us an abominable legacy of junk collectibles.

The really sad thing about all this is that many people under the age of 40 have never experienced high quality consumer goods.  While unfortunate, this situation is unlikely to change anytime soon.  Of course, that only makes high quality antiques all the more desirable.  Once you see and touch true quality, you’ll never want to go back to using junk goods ever again.

 

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Every Woman Should Own a Stash of High Quality Jewelry

Every Woman Should Own a Stash of High Quality Jewelry

I read an interesting comment on the internet the other day that really got me thinking.  An anonymous woman remarked that high quality jewelry is now a luxury that many women can no longer afford.  In addition, she observed that fewer women are wearing fine jewelry on a regular basis.  I’ve reproduced her comment here for reference:

“Jewelry is now the great divide between the have and have-nots of the female variety.  I still own some silver jewelry, because it wasn’t worth selling when we needed the money.  I get noticed when I wear it because most women don’t have real jewelry anymore.  Even women who can afford jewelry are not wearing it out anymore, but they still have their wedding and engagement rings.”

Unfortunately, I must agree with this woman’s assessment.  It seems that fewer and fewer women are buying or wearing high quality jewelry anymore.  I think the persistently weak economy is the obvious culprit here.  Sluggish wage growth, coupled with continuously rising housing, food and insurance costs, has squeezed discretionary spending.  High quality jewelry has been one of the many unfortunate victims of this economic trend.

As a result, a lot of budget constrained women have reallocated their precious jewelry dollars from fine jewelry to costume jewelry.  This has been a reasonable reaction to economic pressure because costume jewelry is so much better looking now than it used to be.  As recently as the 1980s and even the early 1990s, costume jewelry was consistently low quality.  It looked cheap and would quickly tarnish or even turn green when exposed to body oils or perspiration.

However, the advent of inexpensive, but alluring, synthetic stones and simulants, coupled with an industry-wide effort to raise the quality of costume jewelry, has made it a much more palatable choice.  This is especially the case when a “real” piece of high quality jewelry might cost several thousand dollars while a similar piece of “fake”, but still attractive, costume jewelry might be just a couple hundred dollars.

The trend toward buying and wearing less high quality jewelry is most noticeable among younger women in their 20s and 30s.  An insightful Pacific Standard article titled “Has Technology Killed the Jewelry Industry?” provocatively lays the blame squarely at the feet of smartphones and other portable technology.

There is certainly an element of truth to this accusation.  Samsung, LG, Sony and Motorola all produce covetable smartphones, tablets and laptops.  However, it is Apple, with its insanely popular trio of the iPhone, iPad and MacBook series, that has had the most success.  In fact, I am of the opinion that Apple isn’t really a technology company at all, but a luxury technology retailer – a vitally important distinction.  Young Millennial women have, as a group, redirected a significant portion of their discretionary spending into these must-have tech gadgets.  Of course, money spent on smartphones or tablets has to come from somewhere.  And that place is often the high quality jewelry budget.

There has also been a tendency for younger generations to spend money on travel, dining, concerts and other “experiential” activities rather than physical goods.  And once spent on an experience, regardless of how compelling, those limited discretionary dollars cannot be spent on high quality jewelry.

Now that I’ve discussed why women aren’t buying as much high quality jewelry anymore, I’d like to explain why every woman should own a stash of fine jewelry.  The first reason is purely economic.  For centuries, high quality jewelry has been considered a store of value – a savings account specifically for women.  This tradition is still strong in some parts of the world.  For instance, owning a sizable stash of high-karat gold jewelry is considered a necessity for any well-to-do Indian, Southeast Asian or Middle Eastern woman.

The reason for jewelry’s persistence over the centuries as a savings vehicle is multi-fold.  Historically, patriarchal laws in many countries prohibited women from officially inheriting property.  High quality jewelry, often received as gifts from family members or spouses, was usually considered to be a woman’s property from a legal standpoint.  If her marriage ended in divorce, a woman could confidently walk away from her former husband knowing her valuable hoard of high quality jewelry was all hers.

While the modern world is much more amenable to female inheritance and ownership of property, there is still a vital investment argument for every woman to own a collection of gemstone-studded, high quality jewelry.  Antique, estate, designer or hand-crafted jewelry, made from karat gold, platinum or sterling silver and set with sparkling precious stones, is the glittering epitome of wealth.  Fine jewelry often has a significant intrinsic value that can range from hundreds of dollars for more modest pieces to millions of dollars for legendary jewels.

But the real value of high quality jewelry is the fact that they are miniature works of art.  As a result, well designed and executed fine jewelry is always worth more than the sum of its parts.  And the stylistic choices available are nearly endless.  The flowing, naturalistic forms of Art Nouveau jewelry are nothing like the jagged shapes and sharp angles of Brutalist jewelry.  There is a style of high quality jewelry that will appeal to every woman.

Perhaps most importantly, nothing highlights the beauty of a woman like fine jewelry.  Whether it is a luscious strand of Tahitian black pearls, a gold cocktail ring set with a glistening blue tourmaline or a pair of simple platinum and diamond stud earrings, high quality jewelry accentuates the best features of a woman in a way no other accessory can.  A woman who wears fine jewelry knows she looks beautiful and, therefore, naturally exudes confidence.  And confidence is priceless.

I understand that many women may not feel comfortable wearing incredibly expensive, high quality jewelry every day.  Less expensive costume or mass-produced silver jewelry works well in these situations.  However, there are certain times in life – weddings, holidays or the occasional night on the town – when a woman just wants to look and feel her best.  For those times, there is no substitute for high quality jewelry.