The year was 2002 and I was scouring downtown Boston for antique bargains. After unsuccessfully looking elsewhere, I finally stopped in at my favorite coin shop, JJ Teaparty. Before they abandoned their physical storefront and became an online only coin store, JJ Teaparty used to acquire random assortments of old, semi-numismatic gold coins. I would gleefully comb through these accumulations, knowing they would sell me good pieces at modest premiums over bullion value.
It didn’t take me long before I found what I was looking for. I requested that six different French 20 franc gold coins be pulled from the display case for closer inspection. The dealer laid a glittering cornucopia of early 19th century French gold before me. There was a fine Napoleonic 20 franc coin, a lovely Louis XVIII piece from the Bourbon Restoration and a nice specimen from the July Monarchy of Louis-Philippe.
But there was more! Two different types of 20 gold franc coins from the short-lived Second Republic of the late 1840s lay in front of me – Genius writing and the head of Ceres. The final cherry on top was a pristine example of a Second Empire 20 franc piece from the reign of Napoleon III. It was a veritable parade of early 19th century French gold. Not only were these 140 to 200 years old coins all in above average condition, but a couple of them were even uncirculated. I coveted them all.
There was only one problem: money. The coins themselves were not very expensive, just $70 each. And with gold trading at a modest $325 a troy ounce at the time, the premium over bullion prices was as low as I could possibly have hoped for with coins of this caliber. But the economy was in recession in 2002 due to the bursting of the internet bubble and my job wasn’t secure. Investing during a recession made sense, but $420 for all six coins was too much money for me to easily part with.
Ultimately, I decided that I could only afford two out of the six gems and chose the Napoleon I piece and one of the Second Republic coins. I paid the dealer his well deserved $140 and left the store almost in tears. You only rarely come across deals that good, and I was distraught at having to leave some of them behind.
In hindsight, I had made a major mistake by not investing during a recession. I should have dug deep into my wallet to find the extra $280 to purchase the remaining four gold coins. I should have found a way to fit it into my budget. I should have, barring any other possibility, just charged it to my credit card. Basically, I should have found a way – any way – to make the deal work.
Why? Because, those six gold coins that cost $420 back in 2002 would today, in 2017, conservatively sell for $1,800. That translates into an annualized return of 10.19% over the last 15 years! This investment performance is especially impressive in light of the fact that the S&P 500 stock index has barely managed more than 6% per annum over the same timeframe.
I believe there is a profound lesson in this story for both coin collectors and antique investors alike. I am firmly convinced that this phenomenal deal was only available because of the deep recession the economy was experiencing at the time. The recession suppressed the price of precious metals, including gold, and reduced the collector’s premium charged on the coins. In short, those French 20 franc gold coins were such great long term investments specifically because of the recession.
This situation applies more broadly to the world of investment grade antiques too. Regardless of what type of antique you are interested in buying, investing during a recession is likely to give you better future returns. Assets are always more reasonably priced in the depths of a broad economic slowdown and this applies doubly to antiques. Money, in general, is scarcer and there are fewer collectors bidding against you.
As a result, antique dealers are usually more willing to be flexible on their pricing in order to maintain business cashflow. But, once the economy recovers, those same antiques will become dear again, resulting in higher prices. For these reasons, investing during a recession often leads to out-sized gains over the long run. Dig deep for the money if you must; your future investment performance depends on it.
