The Top 5 Mistakes Collectibles Investors Make

The Top 5 Mistakes Collectibles Investors Make

Thinking of investing in vintage collectibles or antiques?  Don’t make these 5 big mistakes that plague many collectibles investors!

 

1) Believing that what worked in the past will work equally well in the future

Although this myth isn’t unique to collectibles investors (indeed it is often shared by financial advisors and pundits), that doesn’t make it any less dangerous.  The logic goes like this:

Because this (fill-in-the-blank) collectible has appreciated strongly over the past 5, 10 or 20 years, then it must be destined to deliver good returns in the future as well.  So you should load up on those late 1970s Star Wars toys, Mid-Century Modern furniture or vintage Coca-Cola memorabilia.

But this superstition runs afoul of the old investing adage, “past performance is no indication of future results.”

What happens instead is that the collectible in question eventually runs into the law of large numbers.  In a nutshell, this dictum states that it becomes increasingly difficult to compound growth as values rise ever higher.  I’ve already discussed this fascinating concept in greater detail as it applies to the rare U.S. coin market.

Let’s conduct a thought experiment.  Early Star Wars toys are valuable today because the movies were so successful – an outcome nobody expected at their initial release in 1977.  Everybody in the world has heard about Star Wars at this point.  How does the franchise get any bigger or more famous?

If you are buying vintage Star Wars toys today hoping to see the same investment returns they’ve experienced over the past 40 years, you are implicitly hoping Star Wars becomes even more culturally influential in the future.  While this outcome isn’t completely impossible, it is exceedingly unlikely.

 

2) Expecting low quality collectibles to appreciate in value

Collectibles investors are faced with a marketplace that is absolutely saturated with low quality vintage junk.  Antique malls, thrift stores and flea markets are all overrun with poorly made plastic and cardboard memorabilia from the 1970s, 80s and 90s.

Beanie babies, Cabbage Patch Kids, (post-1980) baseball cards and (modern) comic books are just a few examples of these junk collectibles.  These throw-away items (and many, many others just like them) were mass-produced by the millions with little thought given to their durability, craftsmanship or future desirability.  This sad state of affairs is reflected in their pricing, where these collectibles are almost universally available for just a few dollars each (and oftentimes even less).

It can be a minefield trying to avoid these junk vintage items.  For example, in the 1980s the Swatch Watch was a cultural phenomenon.  These boldly colored and strikingly styled wristwatches were churned out by Swiss watch manufacturers in an attempt to win back some business from the flood of cheap quartz models that had decimated their market share in the late 1970s.

But Swatch Watches were meant to be low-priced, consumable fashion items.  They were usually made from plastic cases with either cheap mechanical or quartz movements.  In contrast, Seiko – a Japanese mid-tier watch brand – built mechanical watches during the same period to a much higher standard than Swatch Watches.

As a result, although vintage Swatch Watches look like they should be great collectibles, they are actually pretty terrible.  On the other hand, collectibles investors can’t go wrong with desirable vintage Seiko mechanical wristwatches.  Quality matters.

 

3) Ignoring demographic trends

Many collectibles investors don’t understand that (at least part of) the antiques market is a popularity contest driven primarily by demographics.  In other words, popular vintage collectibles are generally fondly-remembered childhood items from the prime collecting demographic – people aged from their mid 30s to early 60s.  Today, this primarily means collectibles from the 1970s and 1980s.

But while this is a well-documented phenomenon, collectibles investors will have a hard time cashing in on it.  This portion of the collectibles market is often driven by whacky, unpredictable fads that make entry and exit points impossible to time with any degree of accuracy.

For instance, Elvis Presley memorabilia was huge in the 1980s and 1990s.  Middle-aged Silent Generation and Baby Boomers couldn’t get enough of Elvis, who had been a staple of their youth.  Late night television infomercials hocked Elvis commemorative plates, compact discs and figurines, among other things.  Antique stores burst at the seams with vintage Elvis items.  And it all sold too.

But where was the peak for Elvis memorabilia?  Was it in 1983?  Or perhaps 1989?  Or maybe it was in 1996?  I don’t know the answer to that question.  And I doubt anyone else knows the answer, either.  However, during those heady days it would have been seductively easy to convince yourself that the gravy-train would never end and that Elvis collectibles would remain popular forever.

But if you did believe the hype, you would have eventually paid for it.  Today, Elvis’ fan base is dying off and his memorabilia is in terminal decline, with prices relentlessly dropping year after year.

Instead of chasing mercurial demographic fads, I believe most collectibles investors would be better served by sticking to high quality items with classic styling.  Even if they go out of fashion temporarily, they will always become popular again at some point in the future due to their high build quality and timeless air.  The Antique Sage’s 5 rules for investment grade antiques can help you choose the right vintage items.

 

4) Buying items that are damaged or in poor condition

Nothing can tempt a person to buy like low, low prices.  And collectibles investors are all too human in this regard.  But many times those low priced vintage items are cheap because they are either damaged or in poor condition.

However, savvy collectibles investors understand that there is no substitute for good condition.  Yes, sometimes an item with certain material defects or age-related issues can be successfully restored.  But even a successful restoration will invariably lower the value of a vintage piece versus a pristine, unrestored specimen.

The lesson here is clear.  Always keep a close eye on condition (including any restorations) and don’t be afraid to walk away from a collectible or antique that has taken one too many dings.

 

5) Being unwilling to pay a modest premium for superlative pieces

This is a topic near and dear to my heart because I’ve learned about it the hard way.  I previously wrote an antique investing article recounting my personal experiences with “the one that got away“.  Unfortunately, this theme – failing to pay-up for terrific specimens – dominated the article.

One day you will come across a particularly fine collectible or antique.  It may be in completely original, perfect condition.  Or perhaps it will be an extremely rare item.  It is even possible that a confluence of many different factors will combine to create a truly outstanding piece.

But when that day comes, you should open your wallet and happily pay the seller his asking price.  As long as the price tag isn’t truly exorbitant, you will almost certainly make money by following this strategy.  Don’t let $100 or $200 stand between you and a proverbial investment gem.

 

Read more thought-provoking Antique Sage investing articles here.

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Japanese Edo Era Shakudo Tsuba

Japanese Edo Era Shakudo Tsuba
Photo Credit: subjaudio

Japanese Edo Era Shakudo Tsuba

Buy It Now Price: $225 (price as of 2018; item no longer available)

Pros:

-A stylized wave motif and delicately gilt flowers adorn this gorgeous 18th century shakudo tsuba (samurai sword guard) from Japan’s Edo period.

-This old Japanese shakudo tsuba measures 5.5 cm (2.17 inches) long by 4.4 cm (1.73 inches) wide.

-The body of this tsuba is made from shakudo, a traditional Japanese alloy containing 93% to 97% copper and 3% to 7% gold.  The unique, velvety-black patina of shakudo is a hallmark of high-end antique Japanese metalwork.

-Japan experienced major social changes during the Edo era (1603 to 1868 AD).  Although the militaristic samurai were ostensibly near the top of feudal Japanese society, the increasing prosperity of merchants and artisans allowed them to flaunt their wealth via eye-catching luxury goods.  It is possible that this tsuba was just such an item, meant to reflect the wealth of its affluent owner (who may not have been a samurai).

-The craftsmanship of this shakudo tsuba is absolutely superb.  The elegance of the central wave design provides a subtle, yet interesting contrast with the etherealness of the flower border.  There are many surviving antique Japanese tsuba, but few of them attain this level of aesthetic sophistication.

-Because most of this tsuba is made from shakudo, it actually possesses a not insignificant intrinsic value.  According to my best guess, there is anywhere between 0.5 and 3 grams of gold locked up in this piece.  With spot gold trading at around $1,200 a troy ounce, the item has an estimated melt value between $19 and $93.  Of course, it goes without saying that you would have to be crazy to scrap such a lovely antique Japanese tsuba.  But it is nice to know that your investment downside is protected nonetheless.

-I don’t think you can look at this shakudo tsuba without being struck by its stylistic similarity to the famous woodblock print by Katsushika Hokusai titled The Great Wave off Kanagawa.  That seminal print was completed in the early 1830s while this particular tsuba probably dates from the mid 18th century to very early 19th century.  Both works were obviously incubated in the same cultural and artistic milieu.

-I believe that antique Japanese tsuba are really undervalued investment vehicles.  And this shakudo tsuba underscores my argument.  How can such an artistically outstanding, historically important piece be so cheap – a mere $225?  And if that price is still too high, you can always make the seller a lower offer!

 

Cons:

-It is really difficult to see any cons with this wonderful old Japanese tsuba.  I suppose you can argue that the metal surrounding the central blade hole has been banged up a bit.  Of course, that also speaks to the item’s age and authenticity, as well.

 

Read more fascinating Antique Sage spotlight posts here.

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The 1902 Sears Roebuck Catalogue – An Inflationary Retrospective

The 1902 Sears Roebuck Catalogue - An Inflationary Retrospective

With the impending bankruptcy of Sears, I felt that now would be a good time to talk about the 1902 Sears Roebuck Catalogue.  This 1200 page monster was the Amazon website of its day, allowing people from even the remotest corner of the country to purchase the latest goods and fashions from a trusted retailer at competitive prices.

Of course, one of the most notable aspects of the 1902 Sears Roebuck Catalogue is the startling difference between modern prices and the 1902 prices advertised in the catalogue.  These dramatic price changes are attributable to inflation, which has been surreptitiously doing its wicked work on the U.S. dollar for a full century now.

My introduction to the 1902 Sears Roebuck Catalogue came as a child when I used to visit my grandmother’s house to mow her lawn.  My grandmother had a reprint of the old book, which I always perused after finishing my lawn-mowing duties.

The thing that always fascinated me about the 1902 Sears Roebuck Catalogue was its inflationary implications – the staggering amount of purchasing power the U.S. dollar had lost between 1902 and the present day.

For example, a men’s solid 14K gold pocket watch with a 17-jewel, Waltham movement (which would have been state of the art at the time) cost between about $30 and $50, depending on the case options chosen (hunting cases were more expensive than open-faced cases).

A quick scan on eBay reveals that similar gold pocket watches in good condition are selling for anywhere from $400 to maybe $2,500 today (in 2018).  Of course, if pocket watches were still produced today, you can bet that retailers would sell them for higher prices than secondhand ones fetch on eBay.

Or maybe instead of a gold pocket watch, you are interested in a breech-loading, double barrel shotgun with a solid walnut stock.  The 1902 Sears Roebuck Catalogue had a full 11 pages of double barrel shotguns to choose from.  Yes, these hunting guns could be anonymously ordered through the mail in 1902 – no identification necessary!

And their prices were almost unbelievably low by today’s standards.  The cheapest examples cost around $8 or $9, while the very finest Remington shotgun with a Damascus steel barrel and an English walnut stock rung up at only $50.  These same shotguns today run from just a few hundred dollars to several thousand dollars, depending on condition, rarity and a myriad of other factors.

Another interesting find in the 1902 Sears Roebuck Catalogue is the selection of concrete-filled steel fire safes for sale.  These robust safes had stepped, 5-flange doors (in order to better resist explosives), applied-gold exterior decoration and built-in interior cabinets.  Prices started at only $6.25 for a cut-down model and rose to a princely $32.25 for the largest size – a 1,150 pound behemoth with an inner steel security door.

In contrast, today it is tough to find a good burglary-fire safe for anything less than about $700.  And prices can easily rise to $5,000 or more for high-security models.  Yes, there are cheaper safes out there, but they are usually sub-par import safes straight off the container ship from China.  If security is important to you, these low-quality, imported safes should be avoided at all costs.

As you can see, regardless of the product category, inflation has decimated the purchasing power of the U.S. dollar over the past 116 years.  According to the Bureau of Labor Statistic’s CPI inflation calculator, the U.S. dollar has lost about 96% of its purchasing power between 1913 (when records were first kept) and 2018.

This means that every dollar in 1913 is equivalent to over $25 today.  However, the BLS calculations use some questionable methodologies, including hedonic adjustments and substitution effects.  Looking at actual prices paints a bleaker picture of inflation, with $1 of goods from the 1902 Sears Roebuck Catalogue equal to something closer to $50 or $100 of goods today – a stunning 98% to 99% loss of purchasing power.

In case you were wondering, the dollar suffered almost no inflation before 1933 because the U.S. was still on the gold standard at the time.

But we have come a long way from the days of the gold standard, and not in a good way.  The fact is that the U.S. dollar has been progressively and systematically destroyed by its supposed protector, the U.S. Federal Reserve.  This disturbing trend is even more blatantly obvious when one examines the secret history of 20th century U.S. currency.

This is why I recommend that investors position themselves in antiques, bullion, fine art and other hard assets over the coming years.  The day is coming when the dollar’s slow motion collapse will transform into a terrifying plunge.  I don’t know about you, but I want to own tangible assets that cannot be arbitrarily printed by a central bank when that time finally arrives.

 

Read more thought-provoking Antique Sage history articles here.

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Crystalline Gold Nugget in Quartz from California

Crystalline Gold Nugget in Quartz from California
Photo Credit: nuggetsbygrant

Crystalline Gold Nugget in Quartz from California

Buy It Now Price: $450.44 (price as of 2018; item no longer available)

Pros:

-This stunning crystalline gold nugget in quartz comes from Sierra County, high in the Sierra Nevada Mountains of northern California.

-This gold in matrix specimen weighs 4.28 grams, which is actually fairly sizable for this type of gold mineralization.  It is about the size of a quarter cut in half.

-Gold was first discovered in California in 1848, which spawned the famous California Gold Rush.  Although easy to access placer gold deposits were exploited at first, by the late 19th century California miners had to venture deep underground in pursuit of the elusive precious metal.

-Matrix is a mining term that refers to the native rock surrounding a valuable ore.  Gold in quartz matrix is not only exceptionally beautiful, but also in extremely high demand by mineral collectors.

-This particular crystalline gold nugget was found in the historical Alleghany gold district of California, very close to the renowned Original Sixteen to One gold mine.  These goldfields are famous for their widely scattered gold-bearing quartz veins, which can vary in thickness from just a few inches to more than 20 feet wide.

-This crystalline gold nugget retains its delicate, intricately branching shape.  This is in stark contrast to gold nuggets recovered from alluvial (river) deposits, which have been compacted and worn smooth via centuries of hydraulic action.  Crystalline gold is the rarest form of natural gold – rarer even than placer gold nuggets (which are incredibly rare themselves).

-The Original Sixteen to One Mine is probably the most famous gold mine in the United States. Discovered in 1896, this extremely rich mine has been in almost continuous production since that time.  The Original Sixteen to One Mine was named after the traditional 19th century exchange ratio between silver and gold.  You can view an interesting video tour of the mine here.

-Gold nuggets from California are rarer and harder to find than gold nuggets from Alaska, Australia or British Columbia.  Because of this rarity and the romance surrounding the California goldfields, gold nuggets from California have an added dimension of desirability.

–Gold nuggets are often overlooked as investments, but shouldn’t be.  Their historical importance combined with their high intrinsic value and unique aesthetics make them an intriguing alternative asset for those looking to escape the uncertainty of paper assets.

-At only $450, I think this crystalline gold nugget from California would make a wonderful addition to your gold nugget collection or tangible asset portfolio.

 

Cons:

-Because they so much rarer, crystalline gold nuggets in matrix are much more expensive per unit of weight than alluvial gold nuggets without matrix.  But they make up for it with dazzling good looks and perennially high collector demand.

 

Read more fascinating Antique Sage spotlight posts here.

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Read in-depth Antique Sage investment guides here.